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Business Debt Delinquencies Are Now Higher Than When Lehman Brothers Collapsed In 2008

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Insolvent - Public DomainYou are about to see more very clear evidence that a new economic crisis has already begun.  During economic recoveries, business debt delinquencies generally fall, and during times of economic recession business debt delinquencies generally rise.  In fact, you will see below that business debt delinquencies shot up dramatically just prior to the last two recessions, and the exact same thing is happening again right now.  In 2008, business debt delinquencies increased at a very frightening pace just before Lehman Brothers collapsed, and this was a very clear sign that big trouble was ahead.  Unfortunately for us, in 2016 business debt delinquencies have already shot up above the level they were sitting at just before the collapse of Lehman Brothers, and every time debt delinquencies have ever gotten this high the U.S. economy has always fallen into recession.

In article after article, I have shown that key indicators for the U.S. economy started falling in either late 2014 or at some point during 2015.  Well, business debt delinquencies are another example of this phenomenon.  According to Wolf Richter, business debt delinquencies have shot up an astounding 137 percent since the fourth quarter of 2014…

Delinquencies of commercial and industrial loans at all banks, after hitting a low point in Q4 2014 of $11.7 billion, have begun to balloon (they’re delinquent when they’re 30 days or more past due). Initially, this was due to the oil & gas fiasco, but increasingly it’s due to trouble in many other sectors, including retail.

Between Q4 2014 and Q1 2016, delinquencies spiked 137% to $27.8 billion.

And we never see this kind of rise unless the U.S. economy is heading into a recession.  Here is more from Wolf Richter

Note how, in this chart by the Board of Governors of the Fed, delinquencies of C&I loans start rising before recessions (shaded areas). I added the red marks to point out where we stand in relationship to the Lehman moment:

Delinquencies-commercial-industrial-loans-2016-q1

Business loan delinquencies are a leading indicator of big economic trouble.

To me, this couldn’t be any clearer.

Just like the U.S. government and just like U.S. consumers, U.S. businesses are absolutely drowning in debt.

In fact, a report that was just released found that debt at U.S. companies has been growing at a pace that is 50 times faster than the rate that cash has been growing.

Just imagine what it would mean for your family if your debt was growing 50 times faster than your bank account.  Needless to say, this is an extremely troubling development

Well, American companies may just have a mountain’s worth of problems, according to a new report from Andrew Chang and David Tesher of S&P Global Ratings.

“At the same time, the imbalance between cash and debt outstanding we reported on last year has gotten even worse: Debt outstanding increased 50x that of cash in 2015,” wrote Chang and Tesher.

“Total debt rose by roughly $850 billion to $6.6 trillion last year, dwarfing the 1% cash growth ($17 billion).”

And the really bad news is that banks all across the country are starting to tighten credit to businesses.

In other words, they are beginning to become much more reluctant to loan money to businesses because debts are going bad at such an alarming rate.

When the flow of credit to the business community starts to slow down, it is inevitable that the overall economy slows down as well.  It is just basic economics.  So the deterioration of the U.S. economy that we have witnessed so far is just the beginning of a process that is going to take quite a while to play out.

And let us not forget that most of the rest of the world is already is much worse shape than we are.  Most global financial markets are officially in bear market territory right now, and some nations are already experiencing full-blown economic depression.

Now that the early chapters of the “next crisis” are here, most American families find themselves ill-equipped to deal with another major downturn.  In fact, USA Today is reporting that approximately two-thirds of the country is currently living paycheck to paycheck…

Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000 emergency, according to an exclusive poll, a signal that despite years after the Great Recession, Americans’ finances remain precarious as ever.

These difficulties span all incomes, according to the poll conducted by The Associated Press-NORC Center for Public Affairs Research. Three-quarters of people in households making less than $50,000 a year and two-thirds of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill.

What are these people going to do when they lose their jobs or their businesses go under?

If you have any doubt that the U.S. economy is already in recession mode, just look at this chart over and over.

For months, I have been warning that the same patterns that immediately preceded previous recessions were happening once again, and this rise in debt delinquencies is another striking example of this phenomenon.

This stuff isn’t complicated.  Anyone that is willing to be honest with themselves should be able to see it.  As a society, we have been making very, very bad decisions for a very, very long period of time, and what we are watching unfold right now are the inevitable consequences of those decisions.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

  • Jorma

    Another excellent article by the author.

    • Richard

      Yes, Jorma. You are right. I have been the leading critic in the past on this site about Michael’s prose and presentation. He’s very clearly listened and as a result the quality of his writing has been TRANSFORMED! I am very impressed.

      Michael, it’s been a while since I wrote a post of encouragement. You are doing a remarkable job. No complaints at all! (Btw, just FYI, it’s not necessary to put two spaces between sentences. That was a holdover from typewriters when the uniform character spacing made it much easier on the eye to leave two spaces between sentences. Not necessary with computers…)

      • mister_roboto

        Well, if you picked up that habit in a typing class in the days of yore, it really does become second nature. It wasn’t until I got very heavily into social media that I stopped doing that myself.

      • Mike

        You’re taking credit for his writing? Utterly ridiculous statement.

  • SM

    I suppose this is a bad time to start a small business eh? Or joining a franchise business like UPS?

    • greyprepper

      I reckon it depends on the business you have in mind. Try not to let all the doom n gloom get in your head. 🙂

      • Kim

        oil business? Drillers, producers and refiners and every layers in between. It’s a mess anyway you look at it.

        • greyprepper

          Ecommerce is doing just fine. That’s what I do for a living. I think that’s the number one reason that the brick n mortar retail outlets are going belly up. They’ve turned into glorified showrooms; why pay for their product when you can get on your phone right there in the store and purchase it from eBay or Amazon at a hefty discount? Don’t misunderstand. I’m certainly not oblivious. My eyes are in my head. But there’s still plenty of ways to make money in this world. 🙂

          • Orac4Prez

            I agree to a large degree. One problem is that its still hard to find opportunities for people, especially when the tech and manufacturing has gone overseas. I have run several large analytical labs and with the rise of computers, instruments have become much smaller and reliable and able to control a huge range of tasks that once required manual handling. I recently viewed a large clinical lab and 10 years ago they employed roughly 80 people. They now have 4 people in the lab and perform 10 times the number of tests. I expanded the scope of our work, but it still doesn’t stop many of the job losses.

          • greyprepper

            Thankfully, Ecommerce is still relatively primitive. A large percentage of eBay and Amazon FBA sellers are just ordinary Joes like me working out of their homes. That may change someday but I’ll worry about that when it happens! I’ve got an exit strategy. But yes, I understand that most of Americas major industries are hurting right now. It’s a damn shame!

          • Kim

            No, I actually appreciate the encouragement in a sea of bad economic news.

            I agree ecommerce is doing ok (not sure I would concede for the right reasons). Problem is that brick and mortar retail is still a huge liability for leveraged up banks. Too much money sunk into the business model and infrastructure. I don’t see how banks withstand belly up brick and mortar retailers no matter how well ecommerce is doing– and it’s doing ok, maybe good, but not fantastic. But as an investment- I would invest in ecommerce.

          • greyprepper

            Well, encouragement was the goal! 😀
            I agree with your statement. Ecommerce isn’t exactly ‘booming’ but it’s relatively strong at the moment, and I believe it will only get bigger. I think Walmart has seen the writing on the wall. They’re closing many of their stores, and I’m counting on them becoming the next big ecommerce behemoth. We shall see! Oh, I like your pic btw, very pretty!

    • ALWAYSTOMORROW

      Henry Ford — “Whether you think you can, or you think you can’t you’re right.”

  • Pilon

    The sooner the GLOBAL RESET, the better

    • Annette Smith

      I agree…I don’t know what is stringing this show along, but, if it would just crash and reset, maybe that is the best thing? I dunno…

  • Robert

    Economic musical chairs. Lots of players and very few chairs.

  • CASTIEL

    A lot of people with debts will see very dificulties in the future..how they gonna pay if they lose their jobs?Thats why i dont have debt….i understand that some people make loans to buy a house and start a family…..but its true that a lot of idiots make loans to a brand new car just to impress the neighbourhood…..to new iphones or Ipads….to go in vacation…etc…..i have two cars, one is in the family 30 years ago…..the other is a bmw from 1994….i have the same phone 4 years ago….i have the farm of my father and i know how to live from the land ……the only thing i need is fuel eletricity and ammunition….stay out of debt and live free…..if the sheeps prefer slavery just to have their new toys…thats their choice

    • Robert

      And then u get diagnosed with a deadly cancer and all your good planning and saving and debt free living changes quickly. I have known a few in my time who felt secure only to have the bottom drop out usually due to health crisis of a family member.

      • CASTIEL

        my father died from cancer…… so dont give me sermons about life…because i m assure that i know life better than you….i didnt plan anything or save anything..i just live one day at time and take care what was left for me….and that i work since i was 8 with him to have something today……and i dont have afraid of death….we all have to go one day….what only matters to me is freedom….and dont be like 90 % of the population : sheeps…..

        • Robert

          My dad died from cancer as well so I get that. You are right about one day at a time but it helps nothing to judge others as if they are somehow stupid. I hate smugness and comments generalizing about people. Most do not get any sort of inheritance as evidently you did with a farm. You did not get where you are on your own. Most have to make ends meet. You are to be congratulated for your personal conservative management but I am going to call out arrogant comments about others.

          • ALWAYSTOMORROW

            Most people do not get an inheritance because their parents think and live like you.

            If you hated debt as much as you say you hate smugness, you would agree with CASTIEL

          • TrollingforTrolls

            Obviously, both you and Castiel are missing the point. He inherited a farm, NOT bought it. As well, I am assuming it was paid off. A huge difference.

          • CASTIEL

            The difference is that my father worked a lot and maded wise decisions……and only buyed the farm and the house when he had the money…..he never gone to the banks…he waited to the moment when we had the necessary capital….and he started with nothing….but those time were better than now…

          • TrollingforTrolls

            I am not berating you at all. It is just easier to make ends meet when you don’t have large payments to meet. And yes, times were better longer ago

          • CASTIEL

            so if your dad died also from cancer….you support debt…that will be passed to your sons?in your first post you said that even i stay out of debt ..one day cancer will get me…true…but at least my sons will not have debt as an inheritage……and yes there a lot of idiots that make debt without necessity….i worked to be where i am since i was a child….

      • ALWAYSTOMORROW

        Robert, if you feel that way then you should most definitely live deep in debt looking forward to deah.

      • mtntrek3

        True. None of us know what’s around the corner in life. Even being sensible about finances isn’t a guarantee that we’ll continually be financially secure. I was quoting my grand dad on another website a couple days ago. He lived to be 99 and passed away recently. The last twenty or so years of his life he said at times, ” Just one catastrophic mishap or medical illness can land one in the poorhouse”. Thankfully that never happened to him. He lived a very fortunate life….. he worked as an electrician for a local business for some 32 years. He was never laid off or had any serious illness/injuries in his life. As I said very fortunate. Once he retired at the age of 66, he and grand mom had the wealth and health to travel the country in a motor home for a good ten years. Even as he was financially secure most of his life…….. he saw that things can change in a heartbeat. One never knows what’s next in this world.

    • rentslave

      Some states make people buy new cars if they judge the rust on their old cars is too hazardous for the roads.Or the emissions levels are too high for cigarette smokers to breathe.

      • CASTIEL

        If you treat your car well …..at least the older ones you can have a car for many decades….These new cars are made to least 10 years maximum…. its just electronics and weak components…..some cars after 3 years are worse than my car with 22 years old….

    • ALWAYSTOMORROW

      “Stay out of debt” I agree 100%. Thats the he best advice anyone could ever give CASTIEL.

  • Scott Comin

    “The beginning of a process that is going to take a long time to play out.” An eternity that will probably never end officially. As long as a collapse doesn’t happen everybody gets to blame themselves. That is what they want us to do BLAME OURSELVES. if a collapse happens the blame goes elsewhere. As long as EBT cards and FOOD STAMPS and WICK can take care of the poor or dishonest entitled and keep them off the streets- NOTHING WRONG HERE. I MUST JUST BE LAZY OR HAVE BAD LUCK. This can go on endlessly until everyone is trapped and enslaved. A collapse would be a gift cause at least we could SEE what is happening. For now we just have to come here to look behind the curtain at the truth. Thanks Michael, I just wish you could tell us WHEN THE COLLAPSE WILL START BEING VISIBLE TO THE NAKED EYE IN MANHATTAN.

    • rentslave

      When you don’t see the Disney people near the subway lines in Times Square.

  • Kim

    Oh my, that is one sharp rise on that chart.

  • Orac4Prez

    I have run large testing labs and to be honest a 30 day delinquency rate for debt repayment is nothing unusual. It is really common for the large international companies to hold off paying for 6-9months, especially for agricultural, food or wine commodities. One company complained that I refused to do any further business with them after the debts were over 2years old, so they complained to the local politicians and we had lots of grief because we were ” destroying export opportunities”. The business was supposedly independent business unit originally formed by the government. If I was to say what I’ve been called by the politicians I would be banned from the site in seconds.
    To be brutally honest, I call the actions of some of the large companies nothing short of blackmail – they backed politicians and expected to be able to get away with anything.

  • J B

    It’s a good thing, less competition
    Only the most dishonest, corrupt, fraudulent, criminal will survive.
    JP Morgan, Goldman Sachs, you are safe.

    • rentslave

      Add $heldon Adelson to that list:He laughs at the Sherman Anti-Trust Act.The other 49 states aren’t allowed to compete with him.

      • J B

        The same Adelson giving Trump 100 Million to help him win, and is organizing Trump a free trip Israel. Making Trump the best Politician money can buy.
        He could have organized a Free Trip to Vegas or even Monaco, but NO it has to be Israel, the fun captiol of the world.

  • Preacher62

    “What are these people going to do when they lose their jobs or their businesses go under?”
    If their hope and trust for provision is in their job or in their business then they will likely be left without hope or provision. Seek first the kingdom of God and his righteousness and whatever you need will be given to you. The creator of all that is, is more than capable of providing for those that are his. God Bless.

    • Gay Veteran

      riiiiiiiiiight, that why there are economically suffering christians

      • Preacher62

        Christian economic suffering is subjective. All one truly needs is enough food and water for one day. If you die tonight then you will need nothing tomorrow. If you live for another day then God has promised that If we will seek first his kingdom and his righteousness then he will give us whatever we need. The lie from Satan and the world is that we NEED a lot more than we really do. This lie is the reason that friendship with the world is enmity with God. Repent and believe the Gospel and you can be saved. Battling that which you claim does not exist seems such a waste of time.

  • Brian

    Michael’s last 3 posts have been spot on and very informing.I am very thankful for Michael’s insight concerning the parallel of the 2008 recession and our current economic nosedive.I’m not promoting fear but there is a mega storm bearing down on America and I urge everone 2 be vigilant and please prepare.God bless

  • Diabolus Candidus

    These articles write themselves.

  • mister_roboto

    And as we know, a lot of this recent corporate debt is being racked up not to support genuine economic activity, but rather to artificially inflate the price of the borrowing companies’ shares in the stock market. So of course this kind of debt is starting to go bad, and of course banks are realizing that it’s a bad bet to keep subsidizing such nonsense-behavior. We really are in the “eating the seed corn” stage.

  • GRAMPA

    The small business climate in this nation has been ruined by the tax and regulation of government. The large corporations get to write off the costs of regulation and use many loopholes provided by their favorite congressman that they support with their campaign donations. they should declare pork as the national dish of government. Government doesn’t work for the people it works to insure the profits of the corporation. I started my business with a second hand truck and five hundred dollars from the family bank account. Our family went without so my employees would have a paycheck. I am proud to say my employees never had one of their paychecks bounce. For a small company my credit was flawless. I took pride in my work and answered my customers concerns. Can our government make that claim? Until America reduces the size of government and removes the draconian regulations our nation will continue our decline and collapse. We cannot compete with nations with lower taxes and little regulations. Products that can be imported cheaper than we can manufacture places the choice of the citizen at risk. Do I buy American and do without or buy foreign because that is what I can afford. At the moment Americans don’t have a choice for government policies have removed it.
    Grampa

  • alan

    But everything looks fine. So must not be a big deal. The media is not reporting anything bad so all is well.

  • Fleming_007

    Every time I read a new article here, the more I’m thinking about vandwelling full time. Single, 30 still hold a full time job and I’ll be debt free by the end of this year. Looking at buying a home or new vehicle is just absurd. Its very difficult to tell where this country will be by the time I pay off a 30 year loan. I fear every month I’ll be laid off. I’d rather live very minimalist so if that happens, I’m not thrown back into debt once again.

  • billtheguy

    Let me see….. Credit card debt, auto loan debt, business debt, and government debt (our debt) Old Yellen better hope she doesn’t get any more holes in her boat!

  • Steeve Girard

    That is strange…. Normally that should not have started until 4 years…
    .
    Is it possible that someone lied about the peak oil year? I always follow the 2011 peak year plan… what if the truth was 2005?
    .
    Could it be possible that money began his grind from 2005?

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